Revisiting Value Frameworks

Several Key Focus Areas, pulling from Margin of Safety and Common Stocks, Uncommon Profits and the Most Important Thing

  • Typically would ask: What’s wrong with it? (if presented an undervalaued asset)
  • Need to assess the market’s apetite for risk, and stance towards risk aversion (with respect to the capital market line)
  • ObserveĀ core / systemic business weakness versus market over-reactions: why are companies undervalued? When will they rebound?
  • Constantly evaluate: what is the business worth?
  • Recall that markets areĀ infefficient (institutional constraints)
  • Understand credit cycles
  • New product initiatives are a good time to continue increasing observations of a company
  • Evaluate management incentives
  • Evaluate market and relevancy of products vis a vis market
  • How sensitive are customers to pricing?
  • What will competitors do in reaction to different courses of action?
  • What is the volume outlook for a business?
  • Analytical observe market sentiment for industry and individual company
  • Observe: capitalization, financial position, breakdown of sales, competitors, insider ownership, margins